Deciding on Ownership Structure
Choosing a corporate name might seem straightforward, but deciding on an ownership structure requires careful consideration.
The ownership structure significantly impacts various aspects of the business, including taxation, liability, and management responsibilities. Entrepreneurs must evaluate their goals, financial situation, and long-term plans when choosing the right structure. Additionally, they should understand the legal implications and benefits when deciding on which type of ownership structure. By thoroughly assessing these factors, business owners can make informed decisions that align with their objectives and ensure the success and sustainability of their enterprise.
In the Philippines, the following are business types according to ownership structures:
1. Proprietorship – is a business owned by one individual with full control and authority. The proprietor owns all assets and is responsible for all liabilities. The proprietor enjoys all profits but also suffers all losses. Proprietors and their businesses share a single TIN for tax purposes. They must register their trade name with the Department of Trade and Industry.
2. Partnership – A partnership is a business owned by two or more individuals. Under the Civil Code of the Philippines, partnerships are separate legal entities from their owners. They can be general partnerships with unlimited liability or limited partnerships with limited liability. Partnerships with over ₱3,000 capital must register with the SEC. Partnerships are generally taxed like corporations.
3. Corporation – A corporation is a business owned by shareholders, established under the Corporation Code, and regulated by the SEC. It has a distinct legal personality separate from its stockholders. Shareholders’ liability is limited to their share capital. Corporations must have 5 to 15 incorporators, each holding at least one share, and a minimum paid-up capital of ₱5,000. Corporations in the Philippines can be stock or non-stock companies.
b. Non-stock Corporation. This is a corporation organized principally for public purposes such as foundations, charitable, educational, cultural, or similar purposes and does not issue shares of stock to its members.
If you were to say start a business that is a one-person operation, it is best to go solo and choose proprietorship. If on the other hand, you are starting a small business with some friends or relatives, you can either go partnership or corporation.
